Oil prices pressured by rising US production, dollar

Oil prices fell Friday due to a surging US dollar, even though OPEC supply cut participants reported high compliance with the agreement and global demand continued to strengthen.

By 1:01 p.m. EST, benchmark Brent was down 1.55 per cent, dropping $1.08 to $68.57/barrel. US WTI fell 58 cents to $65.22/barrel, down over 2 per cent for the week and on track for its biggest weekly loss since October.

The Canadian Crude Index fell 73 cents to $35.44.

As the US dollar gained, oil prices fell. US jobs growth surged in January and wages rose further, recording their largest annual gain in over 8 1/2 years.

“Oil prices have come under pressure because of rising oil production in the U.S., together with a marginal rebound in the U.S. dollar index. The price is currently in overbought territory, which has also promoted profit taking,” Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics told Reuters.

Despite the gains in the US dollar, crude remained supported by strong compliance by OPEC supply cut participants and growing global demand.

“The OPEC/non-OPEC production and U.S. tight oil have justifiably been a focus this year. Yet demand has quietly underpinned the tightening of the market over the past year,” Reuters reports Jon Rigby, UBS analyst, said in a note.

In 2017, global oil demand grew by 1.6 million barrels per day (b/d). UBS predicts demand will grow by another 1.3 million b/d in 2018.

A survey by Reuters shows OPEC production in January rose from an eight-month low. Russian data reported strong compliance with the pact last month, even as production in Russia hit 10.95 million b/d.

In November, US production topped 10 million b/d for the first time since 1970, according to the US Energy Information Administration.

On Friday, Baker Hughes reported that the US oil rig count rose by six to 765. This is the second consecutive week that the rig count rose.

This time last year, there were 583 rigs operational in the United States. In Canada, the oil rig count rose by 14 to 234, which is 37 oil rigs more than were up and running at this time last year.